Accurate vat calculation can help you calculate exact vat rates

When you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very easy and you will need to display all your calculations in your vat invoices as well as your vat returns too.

In case you are based in the UK you would then have turned into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past Year. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number together with vat validation vat rates next to your services or goods that you have sold to the clients. In order to calculate vat you need to know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the UK.

There are 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your products or services within the right classification then you should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules if you import goods from any eu country. In the UK vat is spread into three slabs, namely the regular rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another lower rate of 5% which is also applicable on certain children?s goods and other services along with a zero vat rate on specific services and goods. Thus, in case a certain product is taxed at 17.5% then your calculations will need to be based on that vat rate only.

For example, let’s say you sell an item at ?100 to your client that attracts vat at 17.5% then your vat calculations will have to display the vat rate, i.e. ?17.50 following the product rate and also the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts will also need to be calculated and summed up in your vat returns. Similarly any vat already paid on services or goods imported by you into the UK can be claimed back via a vat reclaim form which also needs to calculate the vat amount paid. You can easily put in a vat accounting software package on your computer so as to accurately calculate vat on each vat invoice since mistakes won’t be viewed kindly by the hmrc vat department.

Your vat returns will likely need calculations of various vat amounts paid and calculated. These calculations may also differ on the vat scheme that you opt for since the flat rate scheme will require different calculations when compared to the other schemes. You will additionally need to read on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.

Accurate calculation of vat is extremely important while selling or buying items that are subject to vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc may also remain pleased with you only once your vat calculation is accurate and clear in your vat documents and books.